The mobile industry and the current state of innovation

A hazy preface

A report out of Booz & Co has taken up the task of mapping the top 1000 companies that spend the most on innovation in what it calls the Global Innovation 1000. The word “innovation” is a pretty elusive term nowadays – we all want it, but we often don't recognize the hurdles involved, and what it actually takes. Such hurdles, as you can guess, are mostly alleviated with money. Lots and lots of money, that companies spend on what often turn out to be dead-end projects, or simply new knowledge and tech that are occasionally way before their time and are therefore put into hibernation mode until a proper application is found. This means that an obscene amount of money is churned into R&D departments across companies with the hope that in the long-term, the investment may end up paying for itself. A parallel that may not be particularly apt, but is sure to instigate your imagination would be the idea of paying now for the latest iPhone or Samsung phone with the promise that it may or not may not reach your door 5, 10 or 20 years from now. That's actually outrageous, most of us would feel very much under the weather at the mere thought that, say the Nexus 5, will be delayed by even a month.

Random musings away, much of the mobile industry, the very reason Internet corners like PhoneArena exist, has been led by innovation for the last decade or so. Unfortunately, annoyingly persistent universal laws, like the one of diminishing returns, assert that the more we innovate, the harder it is to continue in the same stride. This, once again, means an ever increasing amount of resources, both money and human, has to be allocated to the task if any one company is hoping to keep up. For this reason, undertakings such as Global Innovation 1000 by Booz & Co are pretty essential, to put it plainly. In fact, in my humble opinion, these charts receive way too little attention from the everyday consumer, despite them being vital across industries.

What will we do without numbers?

Anyway, nice talk, but you're probably itching to hear who these brave companies are and exactly how much did they dole out so that we can have flexible screens, wearables and whatever it is that the future holds. At the top (2nd overall) of the R&D spending chart, at least as far as the mobile industry is concerned, is Samsung with $10.4 billion, or 5.8% of its total revenue. Sammy has been a real trooper in this particular category, though you will be served well to remember that the South Korea-based consumer electronics giant is involved in more than a few different industries. Trailing not far behind are Intel (4th) and Microsoft (5th) with $10.1bn and $9.8bn respectively. Next up is Google, though it should be noted that 2013 is the year that the marked the Internet giant's first entry into Top 20 territory. That's thanks to a 31.6% increase on year in R&D spending, up to $6.8bn – nice going, Google! At the bottom of the Top 20 chart, we have Nokia ($6.1bn, down 14.4%) and Sony with $5.7bn and a healthy 9.7% increase. Overall, the top 1000 most innovative companies (by spending, at least) contributed a whopping $638bn, $159.2bn of which courtesy of our Top 20.

These, of course, are just numbers, and there's an argument to be made that a dollar for one company doesn't necessarily equal the potentially more innovative dollar of another. Obviously, this is all marred in a bog of bias and perception. Speaking of which, in order to make the report complete, Booz & Co have also surveyed consumers, asking them to identify the most innovative company as they see it. Unsurprisingly, Apple is at the very top, and that's probably fair, seeing as Cupertino is also a big R&D spender with $3.4bn invested in 2013. Google, Samsung and Amazon, respectively, take up the next 3 slots, and we also have Microsoft (7th) and Facebook (10th).

Where now? What now?

A few things in the new report are strikingly on target. First off, there's simply no denying that the mobile industry is currently at the forefront on more than just innovation, but also in a social and economical sense. The former is showcased with the industry taking the biggest share of the innovation cake, while the latter is plainly obvious from the presence of 7 out of the 10 companies that we see as most innovative being engaged with the mobile industry in one way or another.

“The Importance of Being Bold”, that's how Booz & Co are concluding their report. But it's not all about taking on daring investments, rather, their studies summarize a simple fact: a major success criteria for companies has consistently been rooted in listening to your customers and what they have to say. And if one company is unwilling to, or is doing a shabby job of it, chances are that at least some of its competitors are doing the very opposite.

As Salesforce's Bill Blau puts it, “The pace of business today does not allow for years to go by. If you're not innovating now, you're going to die, quickly”.

Yeah, but if you check Samsung's revenues you will realise that Samsung put only small pie in R&D. Intel is way better player here, because they spent 15% of its revenues on R&D (Sami only around 5%)...

Nokia still makes a lot of products. Apple makes ~ 10 hardware products, and around the same number of software products. Nokia is more than just a consumer electronics company, whereas that is all that Apple is.

Judging from the % of revenue, Samsung is rather low on the list, and Apple is just pathetic.

I'm all the more impressed with Tesla, but not completely surprised they're spending 66 % of their revenue on research and development.

As for the mobile industry, Nokia really shows why they're so innovative even without being the largest manufacturer. Spending 16 % of their revenues on RnD. Right up there among the innovative giants like Google, Microsoft and Intel.

Nokia spent 3 times more money of available money than Sami, and even more than Apple. Nokia spent 6.1 bn $, Samsung 10.4 bn $, but Nokia has 6 time less revenues than Sami. And discrepance was even bigger in previous years...

You can't look at the % of revenue spent on R&D and make conclusions about whether a company is doing a decent job or not. You have NO Idea what they are spending the money on.

Company X may be throwing billions of $$ at random ideas or technology in the hopes that one is a success, where Company Y may be much more focused and spend much less but with clear direction.

Can't really bag on Apple too much either (as much as I'd love to). It's not a fair comparison between Apple's R&D spend and Samsung. Apple is a much less diverse company, where Samsung into many different industries. A more accurate comparison between the two companies would be in the computer/phone segment.

it is interesting to me to see Tesla spend SO MUCH on R&D.. I love the whole story behind the company and that they are taking on the big auto players.. and doing very well! I hope one day to have a Tesla!

"Company X may be throwing billions of $$ at random ideas or technology in the hopes that one is a success"

Yes, this is called being innovative. Figuring out new technology and new solutions. It's expensive but means occasional breakthroughs. These are the companies that should be praised for actually doing sensible things with their profits.

"Company Y may be much more focused and spend much less but with clear direction."

And that's called doing some fine-polishing on the edges of the shoulders of the giants the company is already standing on. It may be pretty, but it won't usher us into a new era of technology.

Realistically a good company does both. It's blatantly obvious which companies are mostly doing fine-polishing though.

Yes, since only one mobile technology company seems to be capable of igniting new markets, it does seem to be pretty logical.

It's not just number of products that count, how efficient a company is also plays into it. $1 billion is the same amount of money at every company, but how much bang each company gets for that $1 billion is a different story. If a company is bloated with a lot of diverse organizations within in and separate, inefficient hierarchies, they will not get the same benefit as will a smaller, more integrated company.

When it comes down to it, all companies have similar hierarchies and cash-flow efficiencies.

There is one thing to point out though: the rule of diminishing returns.

If you focus on one field of research and spend 5 billion dollars, you won't get a whole lot more if you instead decide to spend 10 billion dollars.
As such, companies that broaden their research fields (Like Google or Nokia) and spend a reasonable sum in each field, are more likely to hit milestones and breakthroughs.

For example, Nokias Advanced Technologies Division is working on both nanotechnology, graphene, software, camera technology, etc. They've produced the H264 coding standard, Low Energy Bluetooth, the imaging technologies, etc. They pretty much dwell in all current fields.

Compare that to Intel who spend a notably large sum, but focus on processors. They're market leading only because they spend so much more to get that tiny edge in one field.

Interesting note though, notice the disparity between public and professional perception perception. Apple isn't even in the top 20 when professionals are concerned while they are first when people are asked. This is the power of marketing right there.

I don't know about marketing. If you ask me, almost 7 of the 10 people even with or without knowledge of tech would still choose apple. You know why?
3 words. "Word of mouth". If 1 guy tells you apple is good. Then passing info only saying buy apple products. Will definitely 100% makes this guy a zombie for apple. Look at the video on the iPhone release. These people have no idea why the chose to wait in line cold and shimmering. You know why? Because they were told that apple is good. But by far not the best....

I said on this website a long time ago that the mobile industry has started to plateau and there were those that thought I was crazy................I knew I was right and I still stand by it. The last 3 technological advances in the mobile industry were RAM, screen size and processor speed AND eventually that'll become an issue to innovate as well. We'll always find a way to innovate an old topic to remain relevant

Actually, I take that back. The three you mentioned aren't innovative, they're evolutionary iterations, as is battery capacity, thinness, weight reduction, and increased capabilities: computers blazed this trail, there's nothing really new save for them being on a mobile device.
Actual innovations would include camera sensors and software where pixels and constantly improved and newly created algorithms are being used in clever and seemingly inconceivable ways, rather than just refining optics and adding more pixels, gesture controls (although those are somewhat derivative, and not new thinking) and super-sensitive displays that can be used without heat or electrical transfer (traditional resistive and capacitive screens), and tech that combines and links computers, phones, video game consoles, and hone automation systems into a seamless ecosystem.

OMG apple spend no money for R & D ??
so why their devices so expensive and hardly change.
i understand it when we buy an android phone or windowsphone, we pay for R & D cost too.
so when iboy buy new shiny ipon, the money goes to? patent court and ads? that innovation.

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